CVG Reports Fourth Quarter and Full Year 2023 Results
Fourth quarter sales of $223 million, record annual sales of $995 million Full year adjusted EBITDA margins increased by 140 bps to 6.8% Provides outlook and guidance for full year 2024
NEW ALBANY, Ohio, March 04, 2024 (GLOBE NEWSWIRE) -- CVG (NASDAQ: CVGI), a diversified industrial products and services company, today announced financial results for its fourth quarter and full year ended December 31, 2023.
Fourth Quarter 2023 Highlights(Compared with prior-year period, where comparisons are noted)
Revenue of $223.1 million, down 5.0% due primarily to the impacts of a strike-related labor stoppage at a customer facility and reduced demand across Vehicle Solutions, Industrial Automation and Aftermarket segments; however, Electrical Systems segment continues to show strong growth with 19.4% increased revenue.
Operating income of $5.0 million, up $9.0 million; adjusted operating income of $6.6 million, down $1.8 million. Lower adjusted operating income was driven primarily by lower volumes and increased SG&A.
Net income of $23.3 million, or $0.70 per diluted share, compared to net loss of $32.0, or $(0.98) per diluted share; adjusted net income of $2.9 million, or $0.09 per diluted share, versus $1.4 million, or $0.04 per diluted share.
Adjusted EBITDA of $10.3 million, down $2.9 million, with an adjusted EBITDA margin of 4.6%, down from 5.7%.
Full Year 2023 Highlights(Compared with prior-year period, where comparisons are noted)
Revenue of $994.7 million, driven by pricing and the contribution of new business wins in Electrical Systems, offset by lower sales volume in Industrial Automation, Vehicle Solutions, and Aftermarket segments.
New business wins in excess of $150 million when fully ramped; these wins were concentrated in our Electrical Systems segment.
Operating income of $48.1 million, up $27.9 million, and adjusted operating income of $51.1 million, up $14.5 million. The increase in operating income was due to improved pricing and business mix.
Full-year 2023 debt paydown was $10.9 million, and net debt declined to $103.7 million; leverage ratio declined to 1.5x from 2.2x.
James Ray, President and Chief Executive Officer, said, "We are pleased with our 2023 results as CVG continued winning new business, particularly in Electrical Systems, and made progress on the Company's transformation plan, driving record annual sales and improved profitability for the year. As we look to fiscal 2024, we are focused on enhancing operational efficiency and quality standards, growing our Electrical Systems segment to be our largest business, as well as facilitating cross-functional collaboration among our various business segments to strengthen our core Vehicle Solutions business and cultivating stronger customer relationships."
Mr. Ray concluded, "As the new CEO, I am grateful for the hard work of our talented global teams that help drive improvements in our business every day, and I am looking forward to a strong fiscal 2024."
Andy Cheung, Chief Financial Officer, added, "We delivered another year of record revenue driven by continued price realization and new business wins, despite softer fourth quarter revenues which were impacted by, among other things, a UAW labor strike at one customer facility. Our strong performance resulted in free cash flow of $19 million in 2023, which has helped us further pay down debt and reduce our net leverage to 1.5x. During the quarter, we initiated several restructuring actions to better align our resources with investments in growth product lines, which we expect will further enhance profitability across our underlying core businesses. Despite industry forecasts for a lower Class 8 truck build in 2024, we expect our financial performance in 2024 to be more resilient as we continue our diversification strategy reflecting primarily the success in growing our Electrical Systems business."
Financial Results (amounts in millions except per share data and percentages)
Fourth Quarter
2023
2022
Change
Revenues
$
223.1
$
234.9
(5.0)%
Gross profit
$
26.2
$
12.4
111.3
%
Gross margin
11.7
%
5.3
%
Adjusted gross profit1
$
26.0
$
23.9
8.8
%
Adjusted gross margin1
11.7
%
10.2
%
Operating income (loss)
$
5.0
$
(4.0
)
NM2
Operating margin
2.2
%
(1.7)%
Adjusted operating income1
$
6.6
$
8.4
(21.4)%
Adjusted operating margin1
2.9
%
3.6
%
Net income (loss)
$
23.3
$
(32.0
)
NM2
Adjusted net income (loss)1
$
2.9
$
1.4
107.1
%
Earnings (loss) per share, diluted
$
0.70
$
(0.98
)
NM2
Adjusted earnings (loss) per share, diluted1
$
0.09
$
0.04
125.0
%
Adjusted EBITDA1
$
10.3
$
13.3
(22.6)%
Adjusted EBITDA margin1
4.6
%
5.7
%
1See Appendix A for GAAP to Non-GAAP reconciliation
2Not meaningful
Consolidated Results
Fourth Quarter 2023 Results
Fourth quarter 2023 revenues were $223.1 million compared to $234.9 million in the prior year period, a decline of 5.0%. The decrease in revenues is due primarily to the impact of a strike at a customer facility, previous year benefit from a post-COVID backlog in Asia-Pacific, and reduced demand in Vehicle Solutions, Aftermarket, and Industrial Automation segments, which more than offset an increase in Electrical Systems revenue. Foreign currency translation favorably impacted fourth quarter 2023 revenues by $1.8 million, or by 0.7%.
Operating income for the fourth quarter 2023 was $5.0 million compared to operating loss of $4.0 million in the prior year period. Foreign currency translation also favorably impacted fourth quarter 2023 operating income by $0.7 million. Excluding special costs, the fourth quarter of 2023 adjusted operating income was $6.6 million, down 21.4%. The decline in adjusted operating income was driven primarily by lower volumes, strike impact, and higher SG&A.
Interest expense was $2.4 million and $2.9 million for the fourth quarter ended December 31, 2023 and 2022, respectively. The decrease in interest expense was due to lower average debt balances, partially offset by higher interest rates on variable debt.
Net income was $23.3 million, or $0.70 per diluted share, for the fourth quarter 2023 compared to net loss of $32.0 million, or $(0.98) per diluted share, in the prior year period.
At December 31, 2023, the Company had no outstanding borrowings on its revolving credit facility, $37.8 million of cash and $160.1 million availability from revolving credit facilities, resulting in total liquidity of $197.9 million.
Segment Results
Fourth Quarter 2023 Results (Compared with prior-year period, where comparisons are noted)
Vehicle Solutions Segment
Revenues were $128.4 million, a decrease of 10.1% primarily resulting from lower volumes and the impact of a strike at a customer facility during the quarter.
Operating income for the fourth quarter 2023 was $3.6 million, a decrease of 1.8%. Excluding special costs, the fourth quarter of 2023 adjusted operating income was $4.0 million, a decrease of 3.9%, as compared to the fourth quarter 2022, primarily due to the impact of lower sales volumes partially offset by pricing improvement and cost controls.
Electrical Systems Segment
Revenues were $56.2 million, an increase of 19.4%, primarily resulting from increased pricing and sales volume.
Operating income was $6.7 million, an increase of 25.0% primarily attributable to pricing and volume leverage.
Aftermarket and Accessories Segment
Revenues were $31.4 million, a decrease of 8.1%, primarily resulting from decreased sales volume.
Operating income was $3.4 million, an increase of 7.3%. Excluding special costs, the fourth quarter of 2023 adjusted operating income decreased 6.4%, as compared to the fourth quarter 2022, primarily due to the lower sales volume, partially offset by increased pricing.
Industrial Automation Segment
Revenues were $7.1 million, a decrease of 35.0%, due to lower sales volume from decreased customer demand.
Operating income was $0.9 million, compared to operating loss of $11.9 million in the prior year. Fourth quarter of 2023 adjusted operating income increased to $0.3 million, compared to an adjusted operating loss of $0.5 million in the fourth quarter 2022, primarily due to cost controls.
Outlook
CVG is providing the following outlook for the full year 2024:
Metric
2024 Outlook ($ millions)
Net Sales
$915 - $1,015
Adjusted EBITDA
$60 - $73
This outlook reflects, among others, current industry forecasts for North American Class 8 truck builds. According to ACT Research, 2024 North American Class 8 truck production levels are expected to be at 285,000 units. The 2023 actual Class 8 truck builds according to the ACT Research was 340,140 units.
We expect to benefit from growth in Electrical Systems, partially offsetting the projected 16% decline in Class 8 truck builds.
GAAP to Non-GAAP Reconciliation
A reconciliation of GAAP to non-GAAP financial measures referenced in this release is included as Appendix A to this release.
Conference Call
A conference call to discuss this press release is scheduled for Tuesday, March 5, 2024, at 10:00 a.m. ET. Management intends to reference the Q4 2023 Earnings Call Presentation posted on our website during the conference call. To participate, dial (888) 259-6580 using conference code 88986985. International participants dial (416) 764-8624 using conference code 88986985.
This call is being webcast and can be accessed through the "Investors" section of CVG's website at www.cvgrp.com, where it will be archived for one year.
A telephonic replay of the conference call will be available for a period of two weeks following the call. To access the replay, dial (877) 674-7070 using access code 986985 and international callers can dial (416) 764-8692 using access code 986985.
Company Contact
Andy Cheung Chief Financial Officer CVG IR@cvgrp.com
At CVG we deliver real solutions to complex design, engineering and manufacturing problems while creating positive change for our customers, industries, and communities we serve. Information about the Company and its products is available on the internet at www.cvgrp.com.
Forward-Looking Statements
This press release contains forward-looking statements that are subject to risks and uncertainties. These statements often include words such as "believe", "anticipate", "plan", "expect", "intend", "will", "should", "could", "would", "project", "continue", "likely", and similar expressions. In particular, this press release may contain forward-looking statements about the Company's expectations for future periods with respect to its plans to improve financial results, the future of the Company's end markets, global supply chain constraints, changes in the Class 8 and Class 5-7 North America truck build rates, performance of the global construction equipment business, the Company's prospects in the wire harness, industrial automation and electric vehicle markets, the Company's initiatives to address customer needs, organic growth, the Company's strategic plans and plans to focus on certain segments, competition faced by the Company, volatility in and disruption to the global economic environment, including inflation and labor shortages and the Company's financial position or other financial information. These statements are based on certain assumptions that the Company has made in light of its experience as well as its perspective on historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Actual results may differ materially from the anticipated results because of certain risks and uncertainties, including those included in the Company's filings with the SEC. There can be no assurance that statements made in this press release relating to future events will be achieved. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by such cautionary statements.
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Twelve Months Ended December 31, 2023 and 2022
(Unaudited)
(Amounts in thousands, except per share amounts)
Three Months Ended
Twelve Months Ended
2023
2022
2023
2022
Revenues
$
223,089
$
234,918
$
994,679
$
981,553
Cost of revenues
196,900
222,517
860,956
895,048
Gross profit
26,189
12,401
133,723
86,505
Selling, general and administrative expenses
21,165
16,406
85,663
66,361
Operating income
5,024
(4,005
)
48,060
20,144
Other (income) expense
707
7,665
1,195
10,463
Interest expense
2,383
2,935
10,691
9,827
Loss on extinguishment of debt
—
—
—
921
Income (loss) before provision for income taxes
1,934
(14,605
)
36,174
(1,067
)
Provision (benefit) for income taxes
(21,347
)
17,384
(13,237
)
20,904
Net income (loss)
$
23,281
$
(31,989
)
$
49,411
$
(21,971
)
Earnings (loss) per common share
Basic
$
0.70
$
(0.98
)
$
1.50
$
(0.68
)
Diluted
$
0.70
$
(0.98
)
$
1.47
$
(0.68
)
Weighted average shares outstanding
Basic
33,132
32,567
33,040
32,334
Diluted
33,443
32,567
33,581
32,334
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2023 and 2022
(Unaudited)
(Amounts in thousands, except per share amounts)
ASSETS
2023
2022
Current Assets:
Cash
$
37,848
$
31,825
Accounts receivable, net
133,949
152,626
Inventories
128,082
142,542
Other current assets
27,863
12,582
Total current assets
327,742
339,575
Property, plant and equipment, net
73,468
67,805
Operating lease right-of-use asset, net
31,165
26,372
Intangible assets, net
11,222
14,620
Deferred income taxes, net
33,568
12,275
Other assets
6,049
9,621
TOTAL ASSETS
$
483,214
$
470,268
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable
$
77,314
$
122,091
Current operating lease liabilities
7,502
7,421
Accrued liabilities and other
45,060
35,388
Current portion of long-term debt
15,313
10,938
Total current liabilities
145,189
175,838
Long-term debt
126,201
141,499
Long-term operating lease liabilities
24,417
19,422
Pension and other post-retirement liabilities
9,196
8,428
Other long-term liabilities
5,279
5,041
Total liabilities
310,282
350,228
Stockholders' equity:
Preferred stock
—
—
Common stock
333
328
Treasury stock, at cost
(16,150
)
(14,514
)
Additional paid-in capital
265,217
261,371
Retained deficit
(46,184
)
(95,595
)
Accumulated other comprehensive loss
(30,284
)
(31,550
)
Total stockholders' equity
172,932
120,040
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
483,214
$
470,268
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
BUSINESS SEGMENT FINANCIAL INFORMATION
Three and Twelve Months Ended December 31, 2023 and 2022
(Unaudited)
(Amounts in thousands)
Three Months Ended
Vehicle Solutions
Electrical Systems
Aftermarket and Accessories
Industrial Automation
Corporate / Other
Total
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Revenues
$
128,411
$
142,765
$
56,188
$
47,054
$
31,367
$
34,141
$
7,123
$
10,958
$
—
$
—
$
223,089
$
234,918
Gross profit
10,095
10,322
8,873
7,136
5,566
5,494
1,655
(10,551
)
—
—
26,189
12,401
Selling, general & administrative expenses
6,501
6,661
2,176
1,778
2,127
2,289
804
1,322
9,557
4,356
21,165
16,406
Operating income (loss)
$
3,594
$
3,661
$
6,697
$
5,358
$
3,439
$
3,205
$
851
$
(11,873
)
$
(9,557
)
$
(4,356
)
$
5,024
$
(4,005
)
Twelve Months Ended
Vehicle Solutions
Electrical Systems
Aftermarket and Accessories
Industrial Automation
Corporate / Other
Total
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Revenues
$
587,119
$
579,731
$
228,424
$
180,404
$
140,236
$
133,671
$
38,900
$
87,747
$
—
$
—
$
994,679
$
981,553
Gross profit
68,129
45,979
35,397
23,993
27,187
18,836
3,010
(2,303
)
—
—
133,723
86,505
Selling, general & administrative expenses
26,109
24,930
9,107
5,775
8,144
6,925
4,392
5,564
37,911
23,167
85,663
66,361
Operating income (loss)
$
42,020
$
21,049
$
26,290
$
18,218
$
19,043
$
11,911
$
(1,382
)
$
(7,867
)
$
(37,911
)
$
(23,167
)
$
48,060
$
20,144
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
Appendix A: Reconciliation of GAAP to Non-GAAP Financial Measures
Three and Twelve Months Ended December 31, 2023 and 2022
(Unaudited)
(Amounts in thousands, except per share amounts and percentages)
Three Months Ended
Twelve Months Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Gross profit
$
26,189
$
12,401
$
133,723
$
86,505
Inventory adjustment
—
10,421
—
10,421
Restructuring
(198
)
1,077
1,245
4,035
Adjusted gross profit
$
25,991
$
23,899
$
134,968
$
100,961
% of revenues
11.7
%
10.2
%
13.6
%
10.3
%
Three Months Ended
Twelve Months Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Operating income (loss)
$
5,024
$
(4,005
)
$
48,060
$
20,144
Restructuring
785
1,978
2,286
5,365
Inventory adjustment
—
10,421
—
10,421
Deferred consideration purchase accounting
—
—
—
341
Executive transition
770
—
770
329
Total operating income adjustments
1,555
12,399
3,056
16,456
Adjusted operating income (loss)
$
6,579
$
8,394
$
51,116
$
36,600
% of revenues
2.9
%
3.6
%
5.1
%
3.7
%
Three Months Ended
Twelve Months Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Net income (loss)
$
23,281
$
(31,989
)
$
49,411
$
(21,971
)
Pre-tax adjusting items:
Operating income (loss) adjustments
1,555
12,399
3,056
16,456
Hryvnia fair value adjustments on forward exchange contracts
—
(134
)
—
(36
)
Loss on early extinguishment of debt
—
—
—
921
Other adjusting items:
Non-cash pension settlement
—
8,086
—
9,202
Pension settlement - tax adjustment
—
1,462
—
1,462
Tax Valuation Allowance
(21,521
)
14,666
(21,521
)
14,666
Adjusted (benefit) provision for income taxes1
(389
)
(3,066
)
(764
)
(4,335
)
Adjusted net income (loss)
$
2,926
$
1,424
$
30,182
$
16,365
Diluted EPS
$
0.70
$
(0.98
)
$
1.47
$
(0.68
)
Adjustments to diluted EPS
$
(0.61
)
$
1.02
$
(0.57
)
$
1.19
Adjusted diluted EPS
$
0.09
$
0.04
$
0.90
$
0.51
Reported Tax (Benefit) Provision adjusted for tax effect of at 25% of pre-tax adjusting items.
Three Months Ended
Twelve Months Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Net income (loss)
$
23,281
$
(31,989
)
$
49,411
$
(21,971
)
Interest expense
2,383
2,935
10,691
9,827
Provision (benefit) for income taxes
(21,347
)
17,384
(13,237
)
20,904
Depreciation expense
3,625
3,727
14,240
14,770
Amortization expense
847
848
3,390
3,411
EBITDA
$
8,789
$
(7,095
)
$
64,495
$
26,941
% of revenues
3.9
%
(3.0)%
6.5
%
2.7
%
EBITDA adjustments
Restructuring
785
1,978
2,286
5,365
Inventory adjustment
—
10,421
—
10,421
Pension settlement
—
8,086
—
9,202
Deferred consideration purchase accounting
—
—
—
341
Hryvnia fair value adjustments on forward exchange contracts
—
(134
)
—
(36
)
Executive transition
770
—
770
329
Loss on early extinguishment of debt
—
—
—
921
Adjusted EBITDA
$
10,344
$
13,256
$
67,551
$
53,484
% of revenues
4.6
%
5.7
%
6.8
%
5.4
%
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
Appendix B: Segment Reconciliation of GAAP to Non-GAAP Financial Measures
Three and Twelve Months Ended December 31, 2023 and 2022
(Unaudited)
(Amounts in thousands, except percentages)
Three Months Ended December 31, 2023
Vehicle Solutions
Electric Systems
Aftermarket
Industrial Automation
Corporate
Total
Operating income (loss)
$
3,594
$
6,697
$
3,439
$
851
$
(9,557
)
$
5,024
Restructuring
386
—
—
(584
)
983
785
Executive transition
—
—
—
—
770
770
Adjusted operating income (loss)
$
3,980
$
6,697
$
3,439
$
267
$
(7,804
)
$
6,579
% of revenues
3.1
%
11.9
%
11.0
%
3.7
%
2.9
%
Twelve Months Ended December 31, 2023
Vehicle Solutions
Electric Systems
Aftermarket
Industrial Automation
Corporate
Total
Operating income (loss)
$
42,020
$
26,290
$
19,043
$
(1,382
)
$
(37,911
)
$
48,060
Restructuring
809
8
—
486
983
2,286
Executive transition
—
—
—
—
770
770
Adjusted operating income (loss)
$
42,829
$
26,298
$
19,043
$
(896
)
$
(36,158
)
$
51,116
% of revenues
7.3
%
11.5
%
13.6
%
(2.3)%
5.1
%
Three Months Ended December 31, 2022
Vehicle Solutions
Electric Systems
Aftermarket
Industrial Automation
Corporate
Total
Operating income (loss)
$
3,661
$
5,358
$
3,205
$
(11,873
)
$
(4,356
)
$
(4,005
)
Restructuring
481
103
469
925
—
1,978
Inventory adjustment
—
—
—
10,421
—
10,421
Adjusted operating income (loss)
$
4,142
$
5,461
$
3,674
$
(527
)
$
(4,356
)
$
8,394
% of revenues
2.9
%
11.6
%
10.8
%
(4.8)%
3.6
%
Twelve Months Ended December 31, 2022
Vehicle Solutions
Electric Systems
Aftermarket
Industrial Automation
Corporate
Total
Operating income (loss)
$
21,049
$
18,218
$
11,911
$
(7,867
)
$
(23,167
)
$
20,144
Restructuring
751
674
1,909
1,725
306
5,365
Inventory adjustment
—
—
10,421
—
10,421
Deferred consideration purchase accounting
—
—
—
341
—
341
Executive transition
—
—
—
—
329
329
Adjusted operating income (loss)
$
21,800
$
18,892
$
13,820
$
4,620
$
(22,532
)
$
36,600
% of revenues
3.8
%
10.5
%
10.3
%
5.3
%
3.7
%
Three Months Ended
Twelve Months Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Cash flow from operating activities
$
8,286
$
35,153
$
38,276
$
68,947
Purchases of property, plant and equipment
(4,500
)
(7,169
)
(19,696
)
(19,710
)
Free cash flow
$
3,786
$
27,984
$
18,580
$
49,237
December 31, 2023
December 31, 2022
Current portion of long-term debt
$
15,313
$
10,938
Long-term debt
126,201
141,499
Less Cash
$
37,848
$
31,825
Total net debt
$
103,666
$
120,612
Use of Non-GAAP Measures
This earnings release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). In general, the non-GAAP measures exclude items that (i) management believes reflect the Company's multi-year corporate activities; or (ii) relate to activities or actions that may have occurred over multiple or in prior periods without predictable trends. Management uses these non-GAAP financial measures internally to evaluate the Company's performance, engage in financial and operational planning and to determine incentive compensation.
Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on the Company's financial and operating results and in comparing the Company's performance to that of its competitors and to comparable reporting periods. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. The financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth above should be carefully evaluated.